HSL....Major Turnaround Story..Outperform ratingHSE Integrated is the national supplier of industrial, health, safety and environmental services.
CI Capital Markets analyst Roy Ma says HSE Integrated will benefit from cost cutting, its franchise value as the biggest player in its space and the fact that it is "undervalued" compared with expected free cash flow generation. The analyst upgraded HSE Integrated to "outperform." The CI Capital stockpicker boosted his one-year target to $1 a share from 60 cents because of improving company fundamentals.
For the first 9 months of 2009 , HSL turned itself around , cash flowing $7.2 million (
.19/share ) on sales of about $60 million.
Its cost compression actions are now starting to make a big difference in free cash flows and, with the economy of Canada growing at a 5 % clip in Q4 and showing continued strong growth in 2010 , HSL will be a superb cash cow in 2010.
Based on recent financial metrics, HSL should cash flow about $13 million in 2010 on annual sales of about $100 million.
That is, it will cash flow about
.35 per share ,sufficient for a fair value of about $1.50 per share.
The balance sheet continues to improve , most of the debt should be paid off from robust 2010 cah flows.
Current hard book value is
.99/share , a value that should increase significvantly in 2010.
HSL has already been subject to one TO bid , which it declined and subsequently put in place a shareholders rights plan.
Nevertheless , it stands out as a prime takeover target at a price that , given its large sales and strategic niche, will have to be above the hard book value to be successful.
As such , the chances of a triple here are excellent...